12:53, 12 February

Eyes off Support at 1.27 after BOE Outlook

After such a positive January, the last two weeks has seen the GBPUSD fall strongly away from the key resistance level at 1.32 and it seems to be eyeing off potential support at 1.27 again. The sterling enjoyed a very positive January as it has moved from below 1.27 up to a three-month high at the resistance level around 1.32, before the recent decline. Starting in mid-December, the GBPUSD had slowly but steadily climbed higher from a two year low below 1.25 up to the current key level of 1.27 and beyond. 
As expected, it met some resistance from the 1.27 level several weeks ago as multiple attempts to push higher were thwarted and now that it has cleared, you could expect the pound to receive some support from this level should it be called upon.

In early December, the 1.27 level gave way to immense selling pressure, after the sterling was again enjoying much needed support from this level as it had firmly established as a key support level as the currency pair had enjoyed considerable support from this level on several occasions in the few months prior. Should the GBPUSD drop through the support at this level, then it could fall considerably further with no obvious support levels nearby.

Around mid-September the GBPUSD reached a two month high right at 1.33 and it is starting to show signs of possible returning to somewhere near that level. Throughout July the GBPUSD was content to trade in a very small range right around the 1.31 level. It was also feeling some selling pressure from the resistance level at 1.32, which again is now playing a role pushing prices lower.

The Bank of England (BOE) has declared that it sees the weakest outlook for the United Kingdom since 2009 due to ongoing Brexit uncertainty.  Last week the BOE sharply downgraded its 2019 economic outlook to 1.2% down from the 1.7% it listed in November, which will result in the slowest pace since the global financial crisis.  Last week, with time running out before the United Kingdom leaves the European Union, the BOE unanimously voted to leave interest rates unchanged at 0.75%.  "U.K. economic growth slowed in late 2018 and appears to have weakened further in early 2019," policymakers at the central bank said.  "This slowdown mainly reflects softer activity abroad and the greater effects from Brexit uncertainties at home," they added.  During a press conference on Thursday last week, BOE Governor Mark Carney said, "The fog of Brexit is creating tension in financial markets.  Now, how these tensions are reconciled once the fog lifts will have consequences for the path of monetary policy in ways that cannot be predicted in advance," he added.  "There's an upside. If there's clarity on the deal sooner and we know the direction we're headed sooner and there's a smooth transition to that destination... we would expect the economy to pick up even more than in this forecast," Carney said.